(Bloomberg) — After missing out on more than $500 million of profit due to a strike, General Motors Co. has reached a potential turning point in its contract negotiations with the United Auto Workers.
Proposals regarding all unsettled issues have been presented to the automaker, and the union is awaiting a response, Terry Dittes, the vice president of the UAW’s GM department, wrote in a letter to the labor group’s leaders Wednesday.
“We will continue to bargain this contract until your bargaining committee is satisfied that we have achieved an agreement that properly addresses our members’ concerns,” Dittes wrote.
The strike has cost GM output of more than 8,000 vehicles a day, according to analysts at IHS Markit. With each vehicle averaging about $8,000 in earnings before interest and taxes, and the walkout affecting nearly nine production days, GM has missed out on as much as $544 million in profit, based on calculations Credit Suisse analyst Dan Levy made in a report last week. The total would reach $700 million by Sunday if no settlement is reached this week.
GM eventually can recoup some vehicle sales by running its assembly lines faster and working plants on overtime, Levy said by phone Wednesday, but the strike is beginning to take its toll. At a minimum, some profit from the third quarter could be shifted to the year’s final three months, when GM would start to make up the missed production.
“After a couple of days, the impact of the strike was just a blip,” Levy said. “After two to three weeks, GM will have to start assessing the impact on the shares.”
GM rose 0.9% to $37.11 on Wednesday and extended gains in after-hours trading. The stock closed at $38.86 on Sept. 13, the last session before the strike began.
If the strike goes on for a month, GM will have lost 226,000 vehicles, according to Joe Langley, an IHS Markit analyst. By Levy’s math, a month-long strike would pile up lost Ebit of close to $1.5 billion.
GM made an initial proposal to the union on Sept. 14 that included $7 billion in investment in eight U.S. plants and more than 5,400 additional jobs, most of which would be new hires. The automaker also offered 2% pay increases in two of the four years and a similar lump-sum payment in the other two — smaller raises and payouts than what union members received in the expired contract. The company said it would keep health plans intact.
The union balked because GM’s proposal fell short in key areas. The raises were too small, and the offer didn’t include terms that its negotiators liked on use of temporary workers and the length of time it takes for shorter-tenured members to get to top-scale pay. Also, GM’s offer to invest in a union-represented battery plant in Lordstown, Ohio, came with a catch that wages would be paid much less than senior assembly workers.
It’s unclear if the union’s proposals are close to what GM negotiators will be willing to accept on sticking points including wages, temp workers, how the battery plant is staffed and at what level its workers are compensated.
With assistance from Keith Naughton.